‘Obamaphone’ Fraud: FCC Kept Under Wraps Until Expanded Program Began

The Federal Communications Commission on Friday announced that it would seek $51 million in damages from a cellphone company that allegedly defrauded the federal Lifeline program of nearly $10 million.

Federal regulators were instructed to keep a massive fraud investigation – concerning the “Obamaphone” program, meant to help get low-income families cellphone access – under wraps until a day after a controversial vote to expand the program, one of those regulators claims.

The commission’s five members unanimously backed the Notice of Apparent Liability (NAL), but Republican commissioner Ajit Pai parted from his colleagues in a partial dissent. According to Pai, he and other commissioners were told not to reveal the details of its investigation until April 1, a day after the FCC voted to expand the Lifeline program.

“Commissioners were told that the Notice of Apparent Liability could not be released or publicly discussed until April 1, 2016, conveniently one day after the Commission was scheduled to expand the Lifeline program to broadband,” Pai wrote. “That’s not right.”

Pai did not say who issued that directive. However, it had the effect of preventing public knowledge of widespread fraud in the Lifeline program ahead of a contentious vote on expanding it despite persisting concerns about a lack of internal safeguards.

FCC spokesman Will Wiquist insisted that the timing was completely coincidental. “The timing of the enforcement action was in no way related to the timing of the vote on the program modernization,” he said in an email.

Lifeline has faced controversy over enrollment requirements that its critics say are too lax and vulnerable to fraud. The service, which subsidizes cellphone plans for low-income Americans, allows beneficiaries to enroll using cards issued for the Supplemental Nutrition Assistance Program (SNAP), a welfare program that has also faced fraud allegations.

Critics of the Lifeline program began calling its subsidized cellphones “Obamaphones” early in the Obama administration in response to viral YouTube videos of beneficiaries thanking the president for their free phones. The program was actually created under President Ronald Reagan.

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